The Housing Bubble

The Mail Tribune reports from Oregon. “Three or four years ago, buyers were snapping up new homes faster than builders could pour foundations. Lately, those same builders are more apt to be sitting on their hands. The median sales price for new construction in Jackson County fell 13.8 percent to $266,200 for the quarter. Existing homes sales activity slowed 33 percent over a similar period a year earlier; the median sales price fell 8.5 percent to $233,325.”

“‘A lot of builders have stopped building unless they’re pre-sold,’ said Coldwell Banker Pro West Real Estate agent Doug Morse. ‘They’re just trying to sell the stuff they have and holding on.’”

“Foreclosures have been a key component in the decline in sale prices. The number of Jackson County homes in default nearly tripled to 124 in January, up from 42 the year before. In February, defaults declined to 103 but were still nearly triple the previous year’s 37.”

“When such homes are sold in distress situations is that additional sales aren’t generated. ‘Normally, you have both a buyer and seller, who is going to look for another house,’ said agent Rich Oliveria. ‘The problem is that when these houses are sold, they’re not buying another house.’”

“As mortgage interest rates hover at 6 to 6.25 percent, high-end buyers are still riding the fence. The majority of action is below the $300,000 mark, while higher-end houses are ‘really quiet,’ said Morse. ‘Buyers are still waiting for the interest rates to go down more. Right now there are lot of bargains.’”

The News Review from Oregon. “Houses in Oregon take a long time to sell. But so far the glut of homes on the market and increases in foreclosures haven’t caused prices to drop like in other parts of the country. However, inventory of listings now pushes beyond 20 months, meaning it would take that long to sell the 1,080 homes on the market.”

“‘(It) is the highest I have seen it in the past 10 years,’ said Neil Hummel, broker in Roseburg. ‘In order for us to get this backlog moving we are going to have to see some movement on the part of sellers to reduce their prices or accept lower than their asking prices.’”

The Bend Bulletin from Oregon. “Central Oregon homes sales are coming off of one of their worst winters in a decade, and the tenor of the industry’s sales incentives is changing. Gone are the offers of free cars and Pottery Barn gift certificates. In their place: cold, hard cash.”

“It’s all about inventory reduction and, so far, price cuts have not done the trick, Renaissance Homes President Randy Sebastian said.”

“Renaissance has shaved anywhere from 11 percent to 20 percent off the list prices of its unsold homes, cutting anywhere from $50,000 to $150,000 per home in south Bend’s Renaissance Ridge and west Bend’s Shevlin Park, Sebastian said.”

“‘The cars, the Pottery Barn, those were kind of on the cusp of the market slowdown,’ Sebastian said. ‘Now the incentives are a little more about the home and it’s a little more serious. People are wanting to make the home more affordable … and homes in Bend have become much more affordable.’”

“In Bend, the Central Oregon MLS had logged fewer than 50 closed sales of homes on urban lots by the last week in February, according to data tracked by Bratton Appraisal Group’s Mike Caba, making it the slowest February for closed deals in at least 10 years.”

“Private sellers also seem to be getting the idea that 2006 asking prices aren’t going to move a house in 2008, although buyers, in aggregate, are still looking for more, broker Norma DuBois said.”

“‘We’re starting to see people come in with prices that are more in line with where the market is,’ DuBois said. ‘We’re not seeing sellers being anywhere near as unrealistic as they were before.’”

The Gazette Times from Oregon. “Tumbling real estate values in much of the country have economists and homeowners struggling to predict where the bottom will fall in the coming year. Built-in demand in the cities surrounding Oregon’s two largest universities helped keep them largely above the fray.”

“‘We have guaranteed action in university towns; they’re not going anywhere,’ said Ann Morgan, a real estate agent in Corvallis. ‘Everybody is listening to the national media who say it’s horrible. It’s not horrible here.’”

“The report showed single-family building permits in Corvallis down 43 percent last year compared to 2006, with more than 100 fewer building permits issued by the city last year. That figure was topped statewide only in Bend, which saw permits plunge by 48 percent.”

“Doug Burton, president of the Willamette Valley Association of Realtors, said the existing supply of homes add to the high value of Benton County real estate. Before the slowdown, he said, new construction in North Albany in the $200,000 price range was snapped up, leaving mid-$300,000 homes the only option for buyers in that part of Benton County.”

“‘If you’re going to live in North Albany, you’re going to pay $300,000,’ he said.”

“The most extreme end of the housing market is the hardest hit, Morgan said. High-end homes over $500,000, which represent the top 10 percent of the Corvallis market, represent the slowest-moving properties and those most likely to depreciate.”

“‘That was so inflated that there’s bound to be a correction,’ Morgan said.”

The Statesman Journal from Oregon. “Take a drive to the outskirts of West or South Salem, and you’re bound to come across the same sight: leveled lots of land. On some lots, houses are going up. Many others are just dirt. It’s a reflection of what officials say is a significant slowdown in residential construction across the city.”

“‘There’s a great deal of inventory of lots but not a lot of building going on,’ said Glenn Gross, Salem’s urban planning administrator.”

“The city of Salem issued 17 building permits for single-family homes in December and again in February, marking the lowest monthly totals since December 2000.”

“The number of people applying for subdivisions also is way down, Gross said. There’ve only been six applications so far this fiscal year, which ends in June, compared with 29 last fiscal year. Locally, many said the slowdown is largely because of the housing surplus.”

“In Salem, there were 291 new homes for sale in January, according to the Willamette Valley MLS. That was only about 50 shy of the number of new homes that sold in the 12 prior months.”

“The surplus, real estate and building experts say, stems from the construction boom in Salem during the past several years. ‘All of the builders here were doing a great job delivering product for the demand, but timing is difficult,’ said Byron Hendricks, president of Prudential Real Estate Professionals. ‘We might have gotten a little top heavy on supply.’”

“‘If demand is down, you have to reduce supply,’ said Mike Erdmann, executive VP of the Home Builders Association of Marion and Polk Counties. ‘If you build a home anyway, it’s just going to sit there.’”

“Not everyone is holding back. Bob Cavell of Salem-based Providence Homes, has 26 homes under construction in two subdivisions in South Salem. His homes typically sell for $240,000 to $320,000.”

“‘It’s slower than it was in 2005, but I’m still moving forward,’ Cavell said. ‘I’m confident in the market based on the price range that we’re in. I think they’ll sell.’”

“Judson’s, a heating, plumbing and electrical company in Salem, is seeing fewer new housing jobs, particularly since late fall, said owner Ron Judson. The subcontractor has had to shorten employees’ hours and do minor layoffs.”

“‘It’s more difficult to keep all of our crew busy,’ Judson said. ‘When we are scheduled, we’re not scheduled nearly as far as we used to be.’”

The Kitsap Sun from Washington. “More ‘For Sale’ signs are going up in front of houses and condos in Kitsap County, but the sales pace is slowing, a combination that hints the real estate doldrums are sticking around.”

“According to new figures from Bellevue-based industry tracker Northwest MLS, 2,489 houses and condominiums were on the market in Kitsap County in February, a 31 percent increase over February 2007. Pending sales, meanwhile, were down 38 percent this February compared with February 2007, and closed sales dropped 11 percent.”

“Bigger housing inventories were the story as well in Mason and Jefferson counties, as they were for 19 of the 39 Washington counties tracked by the NMLS. February inventories for those 19 counties rose 39 percent over February 2007. Pending sales for the 19 were down 31 percent.”

“Meanwhile, median Kitsap house and condo prices combined so far this year are all over the map compared with January and February of 2007.”

“Smarting from a 10-month backlog of unsold homes in Kitsap County, builders are talking very seriously about new ways to sweeten deals to bring in buyers.”

“Reducing prices much more isn’t enough. Offering a host of incentives designed to calm buyers’ jitters and protect them in an uncertain housing market may be.”

“Rick Courson of Cedar Bay Homes Inc. of Silverdale suggested to members of the Home Builders Association of Kitsap County, that they consider buying their customers’ old homes or taking them as trades so they can buy new ones. Or, that they offer generous, irresistible maintenance plans for long after the home deal is closed.”

“‘The bottom line is that our inventory is starting to grow,’ said Courson, who builds high-end, green homes.”

“Dave Smith of Central Highlands Inc. said builders should consider reimbursing customers if their homes lose value after sales close, or even buying back the homes. ‘Cover the buyer’s risk of price reduction,’ he said.”

“Buyers here are simply too frightened to buy, the local builders said. ‘They’re scared to get into a house and have the thing turn upside down,’ Smith said.”

“Larry Skinner, seller at Poulsbo Place II, sees the same fear. ‘They walk into my sales office with a dark cloud over their head,’ he said.”

“Besides the fear factor, Courson said today’s big backlog of local homes was caused by non-local investors and home builders starting to do business here. Flippers, people who buy low and immediately sell at a higher price, had a role, as well as slower population and job growth, he said.”

“Smith said he believes prospective buyers are waiting in the wings, but they’re trembling mightily ‘We do need to address theses fears, and we need to address them hard,’ he said.”

The Seattle Times from Washington. “Eric and Whitney Johnsen prepared to sell their house as they shopped for a larger replacement. Recently they found it, in Newcastle. ‘We found a house we liked and fell in love too fast and there was a huge variable — we had to sell our house and the market was terrible,’ Eric Johnsen says. They didn’t want to own two homes.”

“A year or so ago, sellers generally wouldn’t agree to the Johnsens’ solution to their dilemma: a contingency allowing buyers weeks to get their home sold or back out of the deal. Sellers didn’t have to.”

“But with sales soft, prices flat and buyers cautious, real-estate agents say, contingencies have returned with a roar. They’re just one of many negotiating tools, from price cuts to help with closing costs, necessary to get homes sold these days.”

“The Newcastle sellers agreed to give the Johnsens 30 days to sell their old home and also shaved 2 percent off their already reduced asking price.”

“February home-sales numbers show why such tactics increasingly are necessary. In King County, single-family house and condominium sales were down 36 percent last month, available properties increased 69 percent and prices were nearly unchanged from a year earlier, the Northwest MLS reported.”

“On the day before the Johnsens’ contingent offer was to expire, buyers materialized for their West Seattle home. Those buyers also wanted to talk let’s-make-a-deal, and so the Johnsens did. They agreed to drop their asking price 2 percent.”

“To make their finances work, the couple couldn’t afford to pay what they’d agreed to for the Newcastle house. So Kari Scott, their agent, went back to the negotiating table for a last-minute price concession — something she says has been extraordinarily rare until recently.”

“Ultimately, the Johnsens got their nearly new four-bedroom home for 7.6 percent less than the original price.”

“‘It’s a whole different atmosphere,’ (said) Diedre Haines, a Coldwell Banker Bain managing broker. ‘In the last five years, we saw very little negotiation. Instead it was multiple offers with escalator clauses. Now sellers are more open to negotiation than they were a year ago.’”

“Scott, the Johnsens’ agent, cautions, however, that while most sellers are more flexible than in the past, they’re not frantic and buyers need to know that.”

“‘The reality is we’re not desperate; we’re not California; we’re not Florida,’ she says, recalling a recent bid. Someone offered 30 percent less than the asking price for a million-dollar house. The sellers laughed.”

“‘It’s fruitless when people put in a ridiculous offer instead of a reasonable offer,’ Scott says.”